Bryony Clarke reports on Labour’s controversial plans to cap energy bills.
The Labour Party would impose a cap on energy bills for every home and business in the UK for 20 months if it wins the 2015 election, Ed Miliband vowed yesterday in his seminal address to the Labour Party Conference in Brighton.
The Labour leader unveiled plans to abolish energy watchdog Ofgem and create a new regulatory regime to govern large energy companies, arguing that the firms had been overcharging “for too long” and it was time to “reset” the energy market. In the meantime, the government would freeze gas and electricity prices until the start of 2017. Miliband claims the move will save the average household £120 and businesses £1,800 – but cost the energy giants £4.5bn.
This emblematic policy was among a series of promises made in his conference speech concerning a ‘national crisis’ in living standards and corporate profiteering. Miliband also pledged to deliver more housing, a higher minimum wage, greater childcare provision and tax cuts for small businesses. And yet in the media analysis that followed the speech, it was the prospect of frozen energy bills that dominated discussions.
Miliband also pledged to deliver more housing, a higher minimum wage, greater childcare provision and tax cuts for small businesses.
Miliband’s remarks were roundly applauded by the Labour Conference audience and welcomed by consumer groups. However, they have incited vehement opposition from the six largest energy companies, who argue that the policy could jeopardise investment and jobs: ultimately leading to power shortages. Energy UK, the body representing largely foreign-owned energy firms, has stated: “Freezing the bill may be superficially attractive, but it will also freeze the money to build and renew power stations, freeze the jobs and livelihoods of the 600,000+ people dependent on the energy industry and make the prospect of energy shortages a reality, pushing up the prices for everyone.” Centrica, the energy firm with the most UK customers has warned, “If prices were to be controlled against a backdrop of rising costs, it would simply not be economically viable for Centrica or indeed any other energy supplier to continue to operate.”
John Longworth, the British Chambers of Commerce chief, also expressed deep reservations about the policy: “Price freezes will be attractive for consumers and small businesses, but we are concerned about the impact that Ed Miliband’s proposal would have on investment in Britain’s ramshackle energy infrastructure. Keeping the lights on and our businesses working is absolutely critical. Short-term price controls and green energy commitments could have a negative effect on Britain’s energy security.”
“Short-term price controls and green energy commitments could have a negative effect on Britain’s energy security.”
The price freeze pledge has inevitably invited criticism from coalition minsters who doubt that Miliband will find it possible to further their efforts to control escalating fuel costs. Liberal Democrat Energy Secretary Ed Davey said: ‘When they tried to fix prices in California it resulted in an electricity crisis and widespread blackouts. We can’t risk the lights going out here too.” Conservatives have also claimed a two year freeze will imperil the development of renewables, for which energy companies have been required to set aside £9bn.
However these criticisms are unlikely to deter Ed Miliband, who has already acknowledged that “the companies won’t like it because it will cost them money.” According to one senior Labour figure, Labour had tested the energy freeze policy on focus groups and seen approval go ‘off the charts’. If energy companies object to the policy, Labour are poised to brand dissenters as fatcats who exploit the public dependency on energy, obfuscate tariffs and are unwilling to dip into the enormous profits they’ve amassed over the years. The move moreover has considerable popular appeal. Richard Lloyd, of the consumer group Which?, said: “Ed Miliband’s promise to fix the broken energy market and freeze prices will give hope to the millions worrying about how they can afford to heat their homes. We now look forward to seeing the detail of how this will work.”
Whether voters will regard the energy price freeze policy as quixotic, unworkable and, as Centrica chairman Sir Roger Carr put it, a “recipe for economic ruin,” or whether they will find it a bold and refreshing announcement of a party standing up against “powerful vested interests” remains to be seen. But in this signature commitment, Miliband displayed a clear intent to reconnect with the party’s social democratic roots and cast off the discredited legacy of New Labour politics. The parameters of debate for the 2015 election have been boldly established.
Bryony is a recent literature graduate and news junkie who has previously written for the Cambridge Student, the New Political Centre and the Independent.
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